Category Archives: Mutual Fund Commentary

January 1, 2017

By David Snowball

Dear friends,

Welcome to the New Year.

If you think contemporary politics are crazy, ask yourself “why is January 1 the start of the year?” Ancient cultures tended to align their calendars with the rhythm of the natural world: solstices, equinoxes, the waxing and waning of the moon, planting seasons and harvests. January 1 aligns with, well, nothing.

Which was the point. The ancient Roman had two calendars running simultaneously. The joint rulers, called consuls, took office around January 1 after the week of solstice celebrations. That began “the consular year.” The religious calendar recognized Continue reading →

For fund managers, a lesson from a failed squatter toilet

By David Snowball

People are weird. They doggedly do things that are stupid and self-destructive. If you ask them “why?” the answer is often “because that’s what I’m comfortable doing.”

Investors are people.

Fund managers are people.

People are people.

People are weird.

Our story begins with smoldering dung. Nearly half of the world’s population cooks their food in stoves, often unvented, that burns solid fuel, often dung. In some parts of Africa it’s 98% while folks in Continue reading →

Launch Alert: GQG Partners Emerging Markets Equity Fund GQGPX

By David Snowball

On December 28, 2016, GQG Partners LLC launched their Emerging Markets Equity Fund which will be managed by Rajiv Jain.

The fund pursues an eminently sensible strategy. They are looking for companies that they believe are “reasonably priced, and have strong fundamental business characteristics, sustainable earnings growth and the ability to outperform peers over a full market cycle and sustain the value of their securities in a market downturn, while [trying to] avoid investments in companies that it believes have low profit margins or unwarranted leverage, and companies that it believes are particularly cyclical, unpredictable or susceptible to rapid earnings declines.” That will tilt the portfolio toward Continue reading →

Launch Alert: Cognios Large Cap Value Fund (COGLX & COGVX)

By David Snowball

On October 3, 2016, Cognios Capital launched Cognios Large Cap Value Fund, which represents the “long” sleeve of its long-short flagship fund, Cognios Market Neutral Large Cap Fund (COGMX/COGIX). They launched the fund in response to requests from existing clients, mostly investment advisors, who wanted easy access to the long-only option. Cognios waited until mid-December to publicize the fund’s launch.

They target high-quality value stocks, rather than growth ones. They use a quantitative screen called ROTA/ROMEROTA (Return on Tangible Assets) is a way of identifying high-quality businesses. At base, it measures a Continue reading →

Updates

By David Snowball

PIMCO pays up

PIMCO has agreed to write to $19.8 million check to resolve a long-running enforcement action initiated by the SEC. The short version: PIMCO launched PIMCO Total Return ETF (BOND), one of the earliest actively-managed ETFs, in 2012. Early performance was eye-opening, since the ETF outperformed PIMCO’s $175 billion flagship Total Return Fund (PTTRX). It turns out that the outperformance was achieved by mispricing 43 of the fund’s 156 holdings and was supported by “other, misleading reasons” offered for the fund’s success.  PIMCO’s description speaks of “43 smaller-sized positions of non-agency mortgage-backed securities using third-party vendor prices, as well as PIMCO’s policies and procedures related to these matters.”

Jaffe on the move

Chuck Jaffe has announced his imminent Continue reading →

Briefly Noted

By David Snowball

SMALL WINS FOR INVESTORS

Effective January 1, 2017, the management fee for AMG River Road Long-Short Fund (ARLSX, formerly ASTON/River Road Long-Short Fund) will be reduced from 1.10% to 0.85% . At the same time AMG River Road Select Value Fund (ARSMX, formerly ASTON/River Road Select Value Fund) drops from 0.9 to 0.75%. In both cases, the total e.r. then falls as well.

AQR Global (AQGNX) and International Equity Funds (AQINX) have reduced their expense ratios by 10 and 5 basis points, respectively.

Ariel has lowered fees on both International (AINTX) and Continue reading →

December 1, 2016

By David Snowball

What a busy month.

On Monday, November 21, four U.S. stock indexes all reached all-time highs: the S&P 500, Dow, Russell 2000 and Nasdaq; it might be that the S&P Midcap 400 did the same, but that’s less clear to me. That feat was last accomplished on December 31, 1999. The coincidence led Chip, our estimable tech director, to launch into a spirited rendition of Prince’s “1999”:

I was dreamin’ when I wrote this
Forgive me if it goes astray
But when I woke up this mornin’
Could of sworn it was judgment day

The sky was all purple
There were people runnin’ everywhere
Tryin’ to run from the destruction
You know I didn’t even care

‘Cause they say two thousand zero zero
Party over, oops out of time
So tonight I’m gonna party like it’s 1999

I was dreamin’ when I wrote this
So sue me if I go too fast
But life is just a party
And parties weren’t meant to last

Continue reading →

The three coolest studies of 2016

By David Snowball

There are scholars whose entire lives are consumed by the need to study mutual funds. Not “study” in the carefree way I do or the deeply-tainted way that marketing-driven organizations do, but “study” with considerable rigor, sophisticated tools and a willingness to struggle with complexity.

While much of the content of these studies is inaccessible to Continue reading →

What Are You Thankful For?

By Mark Wilson

What Are You Thankful For?

Thanksgiving is my favorite holiday.  We get four days off, gather with our family and friends, and prepare and eat (hopefully) good food.  All of this without the extra “stresses” of the 4th of July or (at our house) Christmas.

Once everyone is seated around the dining room table, we wait for my father-in-law to ask the question “Can we go around the table and each share what we are thankful for?”  This is a longstanding tradition and another reason why I enjoy the holiday.  It’s great to hear answers ranging from “our family’s health” and “Uncle Russ has joined us” to “cranberry sauce!” and “the turkey is Continue reading →

Elevator Talk: Colin Symons, Symons Value (SAVIX)

By David Snowball

Since the number of funds we can cover in-depth is smaller than the number of funds worthy of in-depth coverage, we’ve decided to offer one or two managers each month the opportunity to make a 200 word pitch to you. That’s about the number of words a slightly-manic elevator companion could share in a minute and a half. In each case, I’ve promised to offer a quick capsule of the fund and a link back to the fund’s site. Other than that, they’ve got 200 words and precisely as much of your time and attention as you’re willing to share. These aren’t endorsements; they’re opportunities to learn more.

Colin Symons manages SAVIX and has managed it since the fund launched in Continue reading →

Prelaunch Alert: Laura Geritz, Grandeur Peak and the Rondure Funds

By David Snowball

When Laura Geritz left Wasatch Advisors in June after a decade with the firm, there was a clear and understandable sense of loss. Ms. Geritz had three public charges:

Wasatch International Opportunities (WAIOX), : a $635 million international small-growth fund. It’s got a five-star rating from Morningstar. Over the past five years, it’s posted higher returns with lower volatility than its Lipper peer group. The estimable Lewis Braham reports Continue reading →

Briefly noted

By David Snowball

In a peculiarly peculiar move, Praxis Small Cap (MMSCX) is becoming Praxis Small Cap Index Fund. Praxis might, charitably, be described as “bad” (its five-year record trails its peers by 600 basis points annually) and “expensive” (1.68% with a 5.25% sales load). In an attempt to be less “bad,” they’re giving up active management but remaining expensive (1.13% with a 5.25% sales load). Here’s advice to prospective providers of index funds: if you can’t make it cheap, you’re going to lose. Praxis is attempting to dodge that ugly truth by being not-quite-an-index funds: its benchmark is the S&P SmallCap 600 but “the Fund seeks to avoid companies that are deemed inconsistent with the stewardship investing core values. In addition, the Adviser uses optimization techniques to Continue reading →

November 1, 2016

By David Snowball

Dear friends,

I walked along today, kicking leaves, marveling at the maples, crunching through my last Golden Russet apple and wondering at the tension between local delight and global despair. Things are good in my life. My classes are full and my students are … hmmm, fascinating in a “bright but so very different from what I recall” way. My son just earned his driver’s license and I bought him a respectable used car. I harvested my first-ever potato crop and the last of my carrots and onions, so roasted root veggies are on the menu this week. I’m happy.

The world beyond mine is less happy. Weather forecasters report that Continue reading →

Ten million miles high

By David Snowball

Technically, 10,315,656 miles high.

The IMF reported in October that global debt, government, corporate and individual, is now $152 trillion. (That’s $152 followed by 000,000,000,000.) That’s historically high, both in absolute terms and relative to global GDP. And it’s not limited to slow-growing developed economies; increasingly emerging markets are issuing debt at a record pace.

Folks at the Endowment for Human Development, who have either spiffy calculators or too much free time, calculate that Continue reading →

Capital Gains Distributions – Not Looking Too Spooky

By Editor

Halloween is the time of year to start thinking about the impact of capital gains distributions from your mutual funds and ETFs. At CapGainsValet.com, we’ve spent the last month updating our site and building our Free and Pro databases. We’ve already made two passes through over 250 fund firm websites looking for 2016 distribution estimates.

As I think about how this year compares to previous years, I have a house full of high schoolers dressed up for a Halloween party. Some of their costumes match my Continue reading →

Counting on the winners

By David Snowball

There’s a good chance that the next five years will be far more challenging for investors than the past five. It’s rare that a market delivers returns (12% annual returns) greater than its volatility (11% standard deviation). We’ve had five years of extraordinary monetary policy; if the next five years look more ordinary (say, 10 year rates back to their normal 3-4% range), there’s likely to be a “repricing” of assets, possibly dramatic, surely erratic. GMO’s asset class projections, which simply assume a return to normal levels of profits and earnings, say that almost all asset classes are set for negative real returns.

For folks looking for managers well-equipped to handle hostile markets, we used Continue reading →

Update: RiverNorth Marketplace Lending Corporation (RMPLX) webcast

By David Snowball

In October, we offered a Launch Alert for RiverNorth’s latest fund, RMPLX. It’s a closed-end interval fund which offers institutional investors access to the quickly evolving marketplace lending sphere. The fund has a million dollar minimum initial investment and, structurally, has some similarities to a hedge fund.

In mid-November, RiverNorth will host a webcast helping investors understand the potential risks, returns and distinctive characteristics of this slice of the market. They’ve done good work with their webcasts before, so folks with the interest and wherewithal might Continue reading →

Update: Litman Gregory Alternative Strategies Fund (MASNX) call

By David Snowball

In a February 2012 Wall Street Journal piece, I nominated MASNX as one of the three most-promising new funds released in 2011.  In normal times, investors might be looking at a moderate stock/bond hybrid for the core of their portfolio.  In extraordinary times, there was a strong argument for looking here as they consider the central building blocks for their strategy. Our profile of the fund that year argued

these really do represent the “A” team in the “alternatives without idiocy” space.  That is, these folks pursue sensible, comprehensible strategies that have worked over time.  Many of their competitors in the “multi-alternative” category pursue bizarre and opaque strategies (“hedge fund index replicant” strategies using derivatives) where the managers mostly say “trust us” and “pay us.”  On whole, this collection is far more reassuring.

Continue reading →

Briefly Noted . . .

By David Snowball

Herewith are notes about the month’s announced changes in the fund industry: closings, openings, name changes, liquidations and more.

Thanks, as ever, to the anonymous and indefatigable Shadow for his yeoman’s work in keeping me, and the members of MFO’s discussion board, current on a swarm of comings and goings.

On October 3, 2016, Henderson Group PLC merged with Janus Capital Group, nominally “a merger of equals.” The Henderson funds will be reorganized into Continue reading →